Trust Services of America, Inc. Toni Brotman Wald v. United States

The United States appeals the district court’s judgment that the United States is not entitled to any setoffs against the es tate tax refund due Trust Services of America, Inc. and Toni Brotman Wald (collectively “Trust Services”) in their capacity as cotrustees of the trust established by Alix Brotman Hodosh’s will. The district court based its judgment on the alternative rationales that the United States was es-topped from asserting affirmative defenses in the nature of setoff, and that both setoff claims lacked merit. We reverse in part, affirm in part, and remand so that the district court may enter an order consistent with this opinion.

BACKGROUND

Alix Brotman Hodosh’s first husband, David M. Brotman, died in 1973, leaving his wife 884,306 shares of common stock in General Health Services, Inc. (“GHS”). GHS is the parent company of the hospital Mr. Brotman founded, Brotman Memorial Hospital. The 884,306 shares of GHS stock that Alix Brotman Hodosh inherited constituted approximately thirty-five percent of all GHS shares outstanding.

In August of 1975, Alix Brotman Hodosh married Harold Hodosh, the driver and trainer of her horses. Mrs. Hodosh died on December 11, 1979…